It's a question
as old as cave dwellings: Should we stay put and remodel
or move to a new place?

There are perfectly
good reasons to stay put, of course. You love your neighborhood.
The schools are great. You enjoy the short commute.
It's "home" in all the best senses of the
word.

In many cases,
remodeling can remove the annoyances that crop up as
your family grows. Extra bathrooms can eliminate the
morning line. New countertops, cabinets and fixtures
can make an old kitchen new again. Energy-efficient
windows, doors, insulation and HVAC systems can help
a project pay for itself in lower energy bills, especially
if they figure into your remodel anyway.

"Many homes
are not built to be flexible, so you really couldn't
add on that third or fourth bedroom easily without spending
a fortune and changing the whole style of the home,"
he says. "I think a lot of people don't want to
put up with that."

The cost of holding
On the other hand, housing consultant Robert Sheehan,
in an eye-opening 1998
survey, found that the cost to keep a typical home
up to standards over 30 years was almost four times
the home's purchase price. Sheehan says he expects only
a slight change (owing to the bubble
effect) when he updates his findings this summer.
The fact is it's getting more expensive to stay put.

"Construction costs have been relatively
stable until recently, but with the hurricanes there
are shortages of timber, gypsum board, even cement.
There is a worldwide competition for raw materials now
with the Chinese and India. There are going to be more
and more pressures facing homeowners," he says.

If your home is 10 years old or older
and facing big-ticket items like a new roof or HVAC
system, these also may factor into your decision to
remodel or move on. Keep in mind, however, that experts
estimate that the cost of moving can run 8 percent to
10 percent of your current home's value for real estate
commissions, closing costs and relocation, according
to the American
Homeowners Foundation.

The bubble effect
The move-versus-remodel dilemma has taken on added significance
in recent years, as consumers retreated in droves from
the stock market following the dot-com collapse and
invested instead in the last bullish market around:
real estate.

Baby boomers suddenly flush with
the historic generational transfer of wealth not only
fixed up the old homestead but also bought a second,
third and fourth as investments. That spike in demand
led in part to skyrocketing home appreciation in many
parts of the country, fueling fears of a real estate
bubble, especially on the coasts.

As the seemingly satiated bull market
slows this year from a stampede to a swagger, homeowners
find themselves flummoxed. We've always been taught
to buy low and sell high, but what do you do when the
choice is to sell high but buy higher? What if you buy
up and the bubble bursts?

"We have a Catch-22 where people
are afraid to sell their home for fear of not being
able to find another," says Walter Maloney, spokesman
for the National
Association of Realtors.

New York real estate broker Barbara
Corcoran agrees: "There is fear that if they pay
the money it takes to get it, they might not see that
money come back. I don't think it's founded, but I wholeheartedly
agree that's the attitude."

Strictly from a financial perspective,
the scale may be swinging toward holding and improving
instead of buying and flipping.

According to the January 2006 remodeling
activity indicator from Harvard's Joint
Center for Housing Studies, or JCHS, Americans spent
$149.5 billion on home improvements in 2005, a 4.3 percent
jump from the previous year. A December 2005 Trusted
Choice survey (commissioned by the Independent Insurance
Agents & Brokers of America) found that nearly one
in four homeowners, or 27 million, said they had significantly
remodeled their homes in the last three years.